What's Behind Given Imaging's (GIVN) Surge?

NEW YORK (TheStreet) -- Given Imaging (GIVN) was one of the markets' biggest gainers on Monday morning, gaining 25.3% to $29.64 and seeing trading volume nearly 100 times its three-month daily average.

The Israeli-based company, which specializes in developing video-camera capsules to diagnose disorders of the gastrointestinal tract, is popping on acquisition news. Covidien (COV) agreed to purchase the company for $860 million, or $30 a share, a 27% premium on Friday closing price of $23.65.

"Acquiring Given will enable Covidien to significantly expand its presence in a $3 billion GI [gastrointestinal] market," said Covidien's Group President of Medical Devices & U.S. Bryan Hanson in a statement.

The transaction is expected to close March 31, 2014 and be accretive to earnings per share by early fiscal 2015 beginning October of next year. Management expects the acquisition to add $40 to $50 million per quarter in incremental revenue.

Covidien shares gained 0.82% to $68.58 by mid-morning. Year to date, the Dublin-based business is up 18.8%.

TheStreet Ratings team rates Covidien PLC as a Buy with a ratings score of A-. The team has this to say about their recommendation:

"We rate Covidien PLC (COV) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, reasonable valuation levels, increase in stock price during the past year and expanding profit margins. We feel these strengths outweigh the fact that the company has had subpar growth in net income."

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